Report Reveals the Underworld Where Your Stolen iPhone Ends Up

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Report Reveals the Underworld Where Your Stolen iPhone Ends Up

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Consumer demand for smartphones is on the rise as mobile users switch from feature phones to smartphones or just upgrade. Alongside the rise in market demand, crime has risen at an accelerated pace. The Hufffington Post has decided to remove the veil and has started a series that explores the global underground trade in stolen smartphones.

As the investigation points out, one storefront in a Detroit suburb attracted so many people with shopping bags full of iPhones and iPads that managers installed a port-a-potty on the sidewalk.

Running a business buying stolen iPhones turned out to be so lucrative that a company that dealt in such devices needed an armored truck to deliver cash each morning to pay for them.

“These companies fence the stolen phones for them, no questions asked,” said Jerry Deaven, an agent with the Department of Homeland Security, which is tasked with preventing the trafficking of stolen goods. “You can walk right into one of these storefronts and sell all the phones at once and walk out with $20,000.”

But what happens with all these stolen iDevices? According to the investigation’s findings, most of them end up in the Middle East and Asia, where consumers ask few questions since they see them as bargains. The vice president of customer finance services at Sprint, Marci Carris, says phones stolen in the US have been located on every continent except Antarctica.

Why? The reason is that an iPhone can be sold for as much as $2,000 in Hong Kong.

“Once it gets overseas, it’s virtually impossible to track a phone back here to the person who committed the crime,” Deaven said.

But phone trafficking is driven largely by the massive profits made by exploiting the price difference between smartphones sold in the U.S. and overseas. Americans who agree to two-year service contracts with their cell phone company can buy the latest iPhones for about $200 — a price subsidized by the carrier. In Hong Kong, an iPhone can be sold for as much as $2,000.

This equation helps explain why more than 1.6 million Americans were victims of smartphone theft last year and why thefts of mobile devices now make up 40 percent of all robberies in major American cities. The rising street crime is exacting a heavy toll on consumers who spend an estimated $30 billion each year replacing lost and stolen devices, according to Lookout, a San Francisco-based mobile security firm.

And the authorities can’t do anything about it. There is a database of stolen phones in the U.S. run as a joint effort by carriers, and there will be one in Canada as well, but the system fails to meet the proposed goal.

This is why New York Attorney General Eric Schneiderman and San Francisco District Attorney George Gascón, and the recently formed S.O.S initiative are pushing for a kill-switch feature from smartphone OEMs. Apple and Samsung have responded: Activation Lock is the Apple response, while the Samsung version is “Lojack for Android.” These features are still being tested at the time of this writing.